Gift Reporting and Tax

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tACKJAYE
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Gift Reporting and Tax

Post by tACKJAYE »

I'm curious about how gift reporting and taxes work, especially in the case of joint accounts. Let's say Person 1 (P1) and Person 2 (P2) have a joint account, and most of the funds in that account belong to/earned by P1. If money or assets are transferred from this joint account to P2's individual account, would it be considered a gift? And if it exceeds the yearly threshold, would it need to be reported?

Thanks in advance!
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AAA
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Re: Gift Reporting and Tax

Post by AAA »

If it's a joint account how can "most of the funds" belong to P1?
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Lee_WSP
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Re: Gift Reporting and Tax

Post by Lee_WSP »

You first withdraw your own funds which you have put in, you next withdraw the funds attributable to the other joint owner. Such a transfer is deemed a completed gift from one owner to the other at that point. Prior to that point, its an incomplete gift since both joint account holders may withdraw whatever they put in plus everything else at any given point in time.
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tACKJAYE
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Re: Gift Reporting and Tax

Post by tACKJAYE »

Maybe I am misunderstanding your answer, but my question is that if all the monies/assets are transferred to P2's account, would P1 have to report it as a gift if it is above the threshold?
Lee_WSP wrote: Tue May 14, 2024 12:22 pm You first withdraw your own funds which you have put in, you next withdraw the funds attributable to the other joint owner. Such a transfer is deemed a completed gift from one owner to the other at that point. Prior to that point, its an incomplete gift since both joint account holders may withdraw whatever they put in plus everything else at any given point in time.
Scorpion Stare
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Re: Gift Reporting and Tax

Post by Scorpion Stare »

Instructions for Form 709:
If you create a joint bank account for yourself and a donee (or a similar kind of ownership by which you can get back the entire fund without the donee's consent), you have made a gift to the donee when the donee draws on the account for the donee’s own benefit. The amount of the gift is the amount that the donee took out without any obligation to repay you.
So yes, if P1 deposits money to the joint account and then P2 withdraws that money to their personal account, it is a gift at that point, and P1 must report it if it exceeds the reporting threshold.
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RickBoglehead
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Re: Gift Reporting and Tax

Post by RickBoglehead »

Are these joint owners husband and wife?
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tACKJAYE
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Re: Gift Reporting and Tax

Post by tACKJAYE »

My question was related to scenarios where joint owners are not spouses or if one of the spouses is not USC.
RickBoglehead wrote: Tue May 14, 2024 8:27 pm Are these joint owners husband and wife?
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